Home Art magazine NFT’s in the Art Market: Everything you want to know

Non-Fungible Tokens. NFTs. A GIF, a tweet, a multimillion-dollar artwork. You have probably witnessed the explosion of NFT-related stories lately—news of high-figure sales, high-profile artists and celebrity makers and sellers just keep rolling in. Perhaps your favourite artist is selling them, or your art collector friend is buying them up; perhaps a sports star recently dropped an NFT collection—and you are just a bit confused about NFT art and the NFT world in general.

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It is certainly true that the fast-growing market is disrupting the arts, music, and financial sectors. NFTs are quickly becoming the next big device in cryptocurrency's crossover, from sketchy e-wallet dealings into a more sanitised public culture domain. When you saw Twitter CEO Jack Dorsey's sell his first tweet for 3 million dollars your mind is likely boggling with questions like what exactly are NFTs? And when that JPEG sold for just over $69 million, you are more likely asking what is NFT art? And the critically minded amongst might be mulling that age-old question; but is it art? 

If you are a little unsure, we are here to explain everything. And if you are an artist looking to create an NFT, or a dealer looking to understand how you can sell NFTs—or an aspiring collector wondering how you can buy NFT art—we will take you step-by-step through everything you need to know so you can put all those questions to bed. And if you are feeling creative and simply eager to find out how you enter the realm of digital wheeling and dealing, then sit back and let us fill you in on the fast-changing NFT art world.

But first of all, before we get into the specifics of what exactly NFT art is, let's get things in order…

What are NFTs?

NFT stands for Non-fungible token. Fungible means replaceable by an identical item. Think of a pound coin. You can exchange one pound coin for another with the same value because a pound coin is fungible. So non-fungible is something you cannot exchange, substitute or replace. 

An original artwork, like an oil painting by Rembrandt, is non-fungible; it is non-replaceable and its value has no stable substitute (as with all art, its value fluctuates with the market). And in the world of NFTs, Non Fungible Tokens are by definition non-replaceable. A non-fungible token, therefore, is a one-of-a-kind digital ownership stamp that links a digital asset (an artwork, a photograph, a digital file, or a tweet) to the Ethereum cryptocurrency blockchain which supports them. 

The Ethereum blockchain acts as a digital ledger that assigns these pieces of digital content additional information, including the right to ownership—kind of like an in-built certificate of authentication. The digital file is yours to keep. As with an original painting, or a limited edition run of artists' prints, the value of NFTs derives from scarcity. And as with any artwork you own, you can sell and trade as you wish, and the value of your asset depends on what others are willing to pay for it. 

But it doesn’t stop at digital assets. You can also buy physical assets as NFTs. In an NFT auction of John Lennon’s belongings in January 2022, bidders were presented with handwritten notes for “Hey Jude” and his iconic Afghan coat. These physical objects were “minted” (more on that later) with images of the physical items. While the winning bidder would not have ownership of the physical objects, they would own the digital token of ownership. 

 

Courtesy of Julius Baer.

 

NFTs and Blockchain explained

Unlike cryptocurrencies, the information linked to an NFT makes it unique—that is, non-replaceable. While there is no difference between one Dogecoin and another, NFTs have uniqueness built into the metadata. Your ownership of this non-substitutable token gives you usage rights to display your digital file or piece of digital content as your own. 

In practice, these digital assets (or easily shareable digital files) could be artworks created in the digital space; they could be JPEGs, GIFs, digital photographs. NFTs transform digital works of art and other collectables into one-of-a-kind, verifiable assets that are easy to trade on the blockchain.

The process of tokenisation of artworks consists of converting a right of ownership on a good into a token, a piece of digital information, which is then issued on a blockchain platform for exchange between users. 

To create a certificate of ownership, NFTs rely on blockchain technology. Blockchain is a kind of shared ledger that is supported by a chain of computers. The technology works by "translating" or "transposing" a contract into code. This includes checking the basic data and automatically performing actions (or giving instructions to perform certain actions). Blockchain technology is therefore useful in facilitating the trade of artworks and the art world in general.

Tokenisation converts a right on a good (usually owned) into a digital information token, which is then issued on a blockchain platform for exchange between users. 

In the art world, tokenisation involves the fractionation of the ownership of artworks, through the tool of tokens, which contain metadata (digital certificates of ownership on the asset). This exchange is regulated through smart contracts, usually on the blockchain Ethereum. The owner of the token becomes the owner of the digital ownership certificate. 

So the question is, what is NFT art?

With celebrity backing and household names promoting the collection of NFTs, it is no wonder their popularity has soared—and perhaps caused some confusion for art lovers. From Paris Hilton (who displays her NFTs on screens around her home) to Snoop Dogg and Grimes releasing their own works, interest and—confusion—around buying, selling and collecting NFT art has grown exponentially. And it is not just celebs getting in on the action; big-name galleries and institutions across the world have jumped on board. 

You probably know that Jeff Koons and David Hockney are just some of the art world's highest net-worth artists. But have you ever heard of Mike Winkelmann? Perhaps you have read about the digital artist known as Beeple, the content creator who sold his digital collage Everydays: The First 5000 Days, at the historic auctioneering house Christie's in February 2021. After Christie's declared their debut in the world of Blockchain offering the collage, bids started at a modest $100, before eventually selling for $69 million. The artwork itself is a product of over a decade’s worth of images posted on his social media account. The auction of this work was the most sizeable NFT art sale ever and the third most expensive artwork sold by a living artist, following Koons and Hockney.

 

Beeple, Everydays, Courtesy of the Guardian.

 

Christie's lucrative entrance into the world of cryptocurrency and NFTs was not a one-off. Following Beeple's success in March, the artist followed up in November 2021 with the work Human One, which sold for 28.9 million. And it is not only Christie's that's cashing in on the hype. The art auction house Philips sold the work REPLICATOR by Michah Dowbak (A.K.A Mad Dog Jone) for 4.1 million dollars in 2021. The artwork itself produces a new NFT every 28 days. 

Countless artworld institutions have mirrored these institutional moves towards NFTs from the Tate to the British Museum. Not only can you invest in art through galleries, art fairs and traditional routes, but you can also use these traditional routes to invest in NFT art. Indeed, since Beeple's success in 2021, artists have gone on to set record-smashing sales prices for their artworks. 

The momentum to invest in NFTs went into overdrive following Beeple’s high-profile sale. Since February 2021, more established artists have followed suit, selling their works as NFTs in the digital space and through established and historic auction houses like Christie's.

The advantages that tokenization can bring to the art sector are countless:

1. Democratization of art and consequent increase in potential buyers.

2. Liquidity for the owners of works.

3. Accessibility on investment performance and sales.

4. Diversification of the client portfolio.

5. Possible valorisation of public collections. 

6. Possible crowdfunding for young artists. 

7. Elimination of intermediation and transaction costs in buying and selling activities. 

8. Immutability of the security and the right deriving from it.

So it seems like a win-win for artists and collectors. So how do artists (and dealers) go about getting their artworks on the market? Let’s discover how to sell NFT art.

How to create NFT art 

If you are wondering how to sell NFT art or you are curious how artists, photographers and digital creators (among many others) can transform their work into NFTs to sell on the market, then you are in the right place. 

If you have got content you would like to sell, or you would like to create your own NFT art from scratch, you will first need to get started on listing sites like Rareible or Opensea. And because we are dealing with cryptocurrency, you have to pay a miner fee (also known as gas). If you are happy to cover these costs, you can start setting up your account to sell your work. 

Rareible is a marketplace that also enables you to create your own art for sale. You can craft your own digital artwork or upload your pre-made file. You can fill in your entry with more detail about your work, description, date and any other information you want to engage potential buyers. You can then set your sale price for your NFT artwork in Ether. 

You can also set your royalties which means you will continue to receive a payment if your artwork resells in the future. 

It is worth bearing in mind that selling NFTs isn't free. You need to purchase cryptocurrency first. You will need this crypto to pay "minting" costs (the fee to set your work up on the blockchain ledger) and to pay gas or transaction fees. Now your work is ready for sale, you will now need to connect your digital wallet to your marketplace and pay the listing fee for listing your digital art. Now you can hit share and wait for bids to roll in. 

How to sell NFT art

There are many sites out there where you can get started, from sites like OpenSea, Rarible, Foundation, VIV3, SuperRare, and NFT ShowRoom amongst many others. Once you choose your marketplace and set up your account, you can create or display the files you want to sell. The process of adding your NFT art to the listing is known as "minting".

Add all the information about your artwork and set a price (in Ether). You will need to pay a listing fee, so you will also need to connect your cryptocurrency wallet.

Once you have minted your NFT and added all your information, you can push your artwork live on the marketplace and wait for NFT buyers to bid on your artwork.

How to buy NFT art

If you are on the lookout for a great deal, want to support your favourite artist or have your eye on an NFT, here's our guide on how to buy NFT art.

Before you get shopping, you first need to open a digital wallet as you will need a place to store your cryptocurrencies or NFTs. Once your wallet is up and running, you will need to purchase some cryptocurrency (like Ether) which allows you to purchase NFTs. You can easily purchase Ether through mainstream platforms like PayPal. When your wallet is ready and stocked with cryptocurrency, you can head to NFT trading sites like OpenSea.io, Rarible, and Foundation to make your first purchase.

Once you register with a marketplace, you can begin browsing for your NFT artwork. Most sites act as an auction, so you will need to bid on specific assets. Once you successfully buy an NFT, you will have the ownership rights to that specific digital asset.

You can browse around the galleries of works on offer much like a traditional auction website. When you find a work you want to purchase, you will see the price in Ether. You can click buy now, checkout and submit. You will then need to pay a gas fee or transaction fee to complete your purchase. Once you have paid, your ownership record gets added to the blockchain ledger. 

How can I collect NFTs?

You can buy and trade NFTs. If you want to sell an NFT you have already purchased, you can follow the same process as any seller (this time without the need to mint your NFT). All you need to do is put your NFT on the marketplace and select "Sell". Remember that buying and selling means you will need to pay gas and marketplace fees—plus any royalties that the original NFT creator has set.

Once you have bought your first NFT, you might start thinking about investing in collections. You can purchase works by the same artist or diversify across different genres, artists and styles. It is still early to tell how safe or high-risk the investments in this unstable new world are. 

 

Part of the Bored Ape Yacht Club series of NFTs. Image: BAYC.

 

Should I invest in NFT art?

As exciting as one-of-a-kind ownership on a digital asset may be, NFTs do not give you the exclusive rights to show, share, exhibit or archive a particular image, nor do they give you ownership of physical or tangible assets. In fact, anyone with internet access can simply Google search your digital file, download it, share it, post it, edit it—and perhaps most importantly, right-click and save the image on their computer. This action made British-based crypto-artists Xcopy create his work "Right-click and Save As guy" which sold for over 7 million dollars in December 2021. 

The reality for many NFT advocates is that the traditional modes of investing in art are out of reach for the average person. Such advocates see the ownership of physical artworks as part of elite culture. They argue that the NFT market has opened doors to welcome smaller budgets and assist artists in the sale of their artworks to a new and highly enthusiastic digital mass audience. But as with any investment, NFTs are speculative.

While many artists and NFT traders are undoubtedly making large sums of money, the risk inherent in NFT investments should not be understated. The market is fast-changing, largely unregulated and subject to dramatic fluctuations.

Amongst the many uncertainties involved in investing in NFT art, there is also the environmental cost. NFTs, like all cryptocurrencies, rely on vast amounts of energy to maintain and store in the digital space. 

And while there may be money to be made from investing in NFT art, the established role of galleries is not over yet. One reality that many artist-to-buyer NFT enthusiasts often forget is that you can still purchase (physical, tangible) artworks directly from artists and take home a physical work of art and put it on your wall.

 

Cover image: 9 seconds Atomized. Courtesy of Snark.art

Stay Tuned on Kooness magazine for more exciting news from the artworld.